Suppose there is an activist A. The activist can improve firm value from V to V with V > 0 and > 0 with a hidden action a {0, 1}. The action is unobservable to everyone except A. Exerting effort (a = 1) is costly: A incurs privately c. A knows her effort cost privately whereas everyone else just knows that c is distributed according to some cdf F[0,). After spending voice effort or not, A can trade. Simultaneously, liquidity traders sell (0, ) shares, don't trade, or buy (0, ) shares each with probability 1 3 . The market is cleared by a competitive market maker who only observes the total order flow Q but not the individual orders. Conjecture the following equilibrium: There is c > 0 so that A exerts effort if c c. If c > c, A does not exert effort. If A exerts effort (a = 1), she buys shares. If she does not exert effort (a = 0), she sells shares. Does possibility for A to trade increase or decrease voice incentives as measured by c? You may first need to determine the